Indexed Universal Life Insurance

[Wayde]

This brings me to another point Wayde. If you are going to try to use logic to prevail, at least make the comparisons apples to apples.

I know what you are thinking- "yeah but term only covers for a certain period of time, while UIL is permanent."

We will fight that by saying life insurance is not a permanent need for the overwhelming majority of people.

It's not logic. It's numbers. If you change the numbers around you get different results. And I believe everyone has shown that.

And yes, if we all just buy Term and Invest the difference it always comes out ahead. Agreed. That has never been my concern. But remember, it's not how much we have but how much we can keep or spend.

[jpg7n16]

And yes, if we all just buy Term and Invest the difference it always comes out ahead. Agreed. That has never been my concern.

Then what exactly are you trying to prove to us?

If you know that buying term and investing the difference is better than buying a whole life policy, why are you so adamant that buying a cash value policy is the way to go?

But remember, it's not how much we have but how much we can keep or spend.

What exactly do you mean by this?

[kv968]

Cash value-mine or not, loans, death benefits, investment or not...I must say my head's spinning from all of this. Let me bring in something that everyone on these boards are also concerned about, FEES.

I just pulled this from Guardian Life's website:

"With Variable Universal Life, any premiums beyond the COI, policy administration fees and premium loads are invested in the available variable investment opti
ons and/or the fixed rate option and have the potential to grow, the policy’s cash value according to the policyholder’s risk tolerance level. And similar to Universal Life, you can opt to infuse more or less money into your policy with any given premium payment. You can choose to not pay a premium for as long as there are sufficient funds in the policy’s account value to cover the charges COI and other policy fees."

All I tend to gravitate towards is "policy administration fees", "premium loads", "policy fees", etc...

They also allow a nice array of riders to "enhance flexibility and value":

"Range of Riders
A range of riders can be added to Universal and Variable Universal policies to enhance flexibility and value. (Riders may incur an additional cost).
• Cash Value Enhancement*
• Waiver of Specified Amount*
• Waiver of Monthly Deductions*
• Enhanced Accelerated Benefit*
• Accelerated Death Benefit*
• Guaranteed Insurability Option
• Accidental Death Benefit*
• Disability Benefit Rider*

*Available on UL only"

My question to you Wayde, since you know the numbers, is what would I be paying as an average annual percentage for a policy and all these niceties? I know there are numerous factors that would affect that percentage so no one would hold you to an exact number, but what would you say the "norm" is? Could you give us and example?

[disneysteve]

Wayde, I'm curious. You have now agreed that cash value policies are not investments. You have also agreed that " if we all just buy Term and Invest the difference it always comes out ahead." That being the case, if I walked into your office tomorrow as a potential new client and told you I was interested in life insurance but didn't know what type to get, term or permanent, what possible scenario would lead you to recommend permanent over term for me?

[Wayde]

[QUOTE]

Then what exactly are you trying to prove to us?

JPG, I am not trying to prove anything. I just see that there are some untrue and only opinions that are being stated about Permanent Policies.

If you know that buying term and investing the difference is better than buying a whole life policy, why are you so adamant that buying a cash value policy is the way to go?

I've never said that buy term and invest the difference is better than buying a whole life or vice versa. Actually they shouldn't even be compared because they both do different things. Again, I do what's best for my client at the given time of their life. I don't push whole life as an investment and say don't buy term and invest the difference. I don't believe you are reading my posts. Again, only point out what is incorrect about what some people on this forum is saying about whole life policy.

What exactly do you mean by this?

Well, only if you are open minded...I will share that sometimes more money doesn't mean that it will last for the certain amount of time that the client wants to retire with. There are inflation and taxation that needs to be accounted for when people are accessing their money during retirement. I will go into this in more detail later on.

[Wayde]

Wayde, I'm curious. You have now agreed that cash value policies are not investments. You have also agreed that " if we all just buy Term and Invest the difference it always comes out ahead." That being the case, if I walked into your office tomorrow as a potential new client and told you I was interested in life insurance but didn't know what type to get, term or permanent, what possible scenario would lead you to recommend permanent over term for me?

Steve, I would not recommend anything for you until I do a full analysis on your financial situation. Now, that would be different from client to client. Not one client I have ever had is the same as the other. Sometimes their financials might look the same but their risk tolerance are totally different. and so on...

Oh Steve, when you mentioned that, "You have now agreed that cash value policies are not investments. You have also agreed that, if we all just buy Term and Invest the difference it always comes out ahead." I was agreeing for the scenario that we were discussing above. That doesn't mean it is always right for my client. Again, I don't go and meet a client and say..."I'm going to have them buy all Term and Invest whatever they have left with stocks, mutual funds, etc..." Any Adviser who does that is not there for the best interest of the client. They are there peddling there philosophies and not doing what's right for the client at that particular time of their lives. I believe this is the reason why most of you on this forum is so mad at Insurance agents because you believe they just keep pushing Whole or Universal Life policies to people like they were investments.

[Wayde]

Cash value-mine or not, loans, death benefits, investment or not...I must say my head's spinning from all of this. Let me bring in something that everyone on these boards are also concerned about, FEES.

I just pulled this from Guardian Life's website:

"With Variable Universal Life, any premiums beyond the COI, policy administration fees and premium loads are invested in the available variable investment opti
ons and/or the fixed rate option and have the potential to grow, the policy’s cash value according to the policyholder’s risk tolerance level. And similar to Universal Life, you can opt to infuse more or less money into your policy with any given premium payment. You can choose to not pay a premium for as long as there are sufficient funds in the policy’s account value to cover the charges COI and other policy fees."

All I tend to gravitate towards is "policy administration fees", "premium loads", "policy fees", etc...

They also allow a nice array of riders to "enhance flexibility and value":

"Range of Riders
A range of riders can be added to Universal and Variable Universal policies to enhance flexibility and value. (Riders may incur an additional cost).
• Cash Value Enhancement*
• Waiver of Specified Amount*
• Waiver of Monthly Deductions*
• Enhanced Accelerated Benefit*
• Accelerated Death Benefit*
• Guaranteed Insurability Option
• Accidental Death Benefit*
• Disability Benefit Rider*

*Available on UL only"

My question to you Wayde, since you know the numbers, is what would I be paying as an average annual percentage for a policy and all these niceties? I know there are numerous factors that would affect that percentage so no one would hold you to an exact number, but what would you say the "norm" is? Could you give us and example?

Sorry KV,

I won't attempt this answer because I won't do it justice. Every company sells it differently with different costs and so on. For me to generalize would not be fair. To really sum it up...More benefits means more Costs.

[dczech09]

Any Adviser who does that is not there for the best interest of the client. They are there peddling there philosophies and not doing what's right for the client at that particular time of their lives. I believe this is the reason why most of you on this forum is so mad at Insurance agents because you believe they just keep pushing Whole or Universal Life policies to people like they were investments.

And that is a good point Wayde. I know for my experiences this has been the case. You're obviously a step up from the run of the mill salespeople that sell these types of policies. At least you can articulate and talk.

Now, I know that you do not condone life insurance as an investment. However my issue this whole time is that you have been talking about "living beneft" and "tax deferred" growth. And really these are phrases used in the industry as a whole which I find alarming.

My question to you is this:
How can you say that life insurance is not an investment, yet turn around and say that there is "tax deferred growth" that is a pro. That is where you lost me. To me, investment and growth are two peas in the same pod.

As for life insurance cash value not being the property of the policy owner...
I am looking more into this. I know that I read this type of language (or legalize of the language) in some policies. I do not know if it is perhaps a contract bias, but either way I need to track down where I read this.

[disneysteve]

Steve, I would not recommend anything for you until I do a full analysis on your financial situation. Now, that would be different from client to client. Not one client I have ever had is the same as the other. Sometimes their financials might look the same but their risk tolerance are totally different. and so on...

Could you have been any more evasive?

I realize every client is different. Earlier, you gave examples with Brother A and Brother B to illustrate how the one with whole life came out ahead. What I'm asking if for you to give us just one hypothetical example of a client for whom you would recommend whole life. What life circumstances or financial needs would lead you to make that recommendation?

[dczech09]

Could you have been any more evasive?

I realize every client is different. Earlier, you gave examples with Brother A and Brother B to illustrate how the one with whole life came out ahead. What I'm asking if for you to give us just one hypothetical example of a client for whom you would recommend whole life. What life circumstances or financial needs would lead you to make that recommendation?

That is a fantastic question. I would love to see Wayde's reply to that.

To me, permanent life insurance is best for somebody (or family) that legitimately has a PERMANENT need for life insurance. Honestly, though I cannot think of a circumstance.

I know some people I have spoke to in the past say that families with special needs (such as disabilities) have a permanent need for LI. However I still fail to see how a cash value policy would best "buy term and invest the difference."

Even though a permanent life insurance policy and "buy term and invest the difference" cannot be compared applets to apples, I still feel that "buy term and invest the difference" would serve a special needs family a little better.

So it certainly would be interesting to hear of circumstances where permanent would be appropriate. Of course, then we step into the argument of "appropriate" versus "best alternative."

[Wayde]

[

QUOTE=dczech09;319408]And that is a good point Wayde. I know for my experiences this has been the case. You're obviously a step up from the run of the mill salespeople that sell these types of policies. At least you can articulate and talk.

Now, I know that you do not condone life insurance as an investment. However my issue this whole time is that you have been talking about "living beneft" and "tax deferred" growth. And really these are phrases used in the industry as a whole which I find alarming.

Living Benefits just came into existence no too long ago. I think less than a decade. Back in the old days, the only time the insured can ever get the death benefit was (like it's title)after death. Now these days, they have policies that allow the insured to access a portion of the death benefit if they are terminally ill or have some sort of major illness. Benefits are different from company to company. This is a very good thing cause the insured can use it to enjoy their life while they are still here and start tying up loose ends. The early benefits also allow for the insured to use that money to pay for medical bills, which we all know is very expensive these days. All these new benefits are now termed "Living Benefits".

My question to you is this:
How can you say that life insurance is not an investment, yet turn around and say that there is "tax deferred growth" that is a pro. That is where you lost me. To me, investment and growth are two peas in the same pod.

Tax deferred growth does not define an investment. If that's the case than a regular mutual fund without tax deferred growth would not be an investment. Tax deferred growth is a term used to describe how something is taxed. If you have money that earns interest and is not being taxed until accessed, that's tax deferred growth. I'm not sure why you have specifically associated tax deferred growth with only investments.

As for life insurance cash value not being the property of the policy owner...
I am looking more into this. I know that I read this type of language (or legalize of the language) in some policies. I do not know if it is perhaps a contract bias, but either way I need to track down where I read this.

Yes, it would be great to know because I wouldn't own a permanent policy knowing the cash value doesn't belong to me. But from my experience so far, I can access it within 24 hrs and if I cancel my policy I get my cash value minus fees if any.

[Wayde]

Could you have been any more evasive?

I realize every client is different. Earlier, you gave examples with Brother A and Brother B to illustrate how the one with whole life came out ahead. What I'm asking if for you to give us just one hypothetical example of a client for whom you would recommend whole life. What life circumstances or financial needs would lead you to make that recommendation?

Steve, I'm not being invasive. I was assuming you wanted me to give you recommendations and that is why I replied in that manner. Now your question has been clarified, I will give you an example.

I had a client the other day and she is 53 years old. All her kids are grown and she wanted to buy some insurance. After doing an analysis and asking her questions about why she wanted to buy...I suggested a $75,000 Whole Life policy paid in full in 15 years.

Hears why I recommended that. She has no debts and no assets. She specifically asked for enough coverage for her funeral and about $10,000 for each of her kids. Well, it would not be good to give her a Term because of her age. These days, people are living longer and longer and I do not want to gamble and give her a term where she out lives it. If she out lives her term, she would have to buy another policy and it would cost a fortune to attain one at her future age. The whole life policy will guarantee that she will get the benefit. The reason that I suggested the 15 years paid in full because, when someone retires...they don't need to be worried about paying monthly bills. She loved the recommendation and took it with no questions.

Now if I was not looking at her age and her needs...and believe so strongly in Term and Invest the difference...I would have sold her the Term and invested the difference, crossing my fingers that she dies before the term is up. Now that is a gamble I'm not willing to take with my clients who are at that age.

[Wayde]

That is a fantastic question. I would love to see Wayde's reply to that.

To me, permanent life insurance is best for somebody (or family) that legitimately has a PERMANENT need for life insurance. Honestly, though I cannot think of a circumstance.

To say you can't think of a circumstance for the need, suggests to me you are not in the industry. I gave an example of that need when I answered the above question.

I know some people I have spoke to in the past say that families with special needs (such as disabilities) have a permanent need for LI. However I still fail to see how a cash value policy would best "buy term and invest the difference."

You fail to see it because you are seeing it from your own perspective and not the client. I would be very upset at you if I was 60 years old and you sold me a 20 year old term (and usually at that age, most company won't go longer than 20 years). I live to 81 and now I have no coverage. If I want coverage it's going to cost me a fortune. I'm 81 years old now and don't need any more bills. I want to enjoy my life at this time. You have put me in a bad situation. Unless you have invested my other portion wisely (but again...why are you gambling with my money. We all agreed there are no crystal balls.)....etc...I hope you see my point.

E

ven though a permanent life insurance policy and "buy term and invest the difference" cannot be compared applets to apples, I still feel that "buy term and invest the difference" would serve a special needs family a little better.

First off, the special needs person should not be gambled with. Buying a term and not a permanent policy is gambling. Someone with special needs usually gets worse over time. Again, if they out live your term...their future policy is going to cost a fortune or maybe, insurance companies may not even insure them any more. Again, Gambling with them is not a good thing. Now if someone is young and have no special needs and is healthy and lives a normal life then term is always better.

So it certainly would be interesting to hear of circumstances where permanent would be appropriate. Of course, then we step into the argument of "appropriate" versus "best alternative."

Well, I believe you hit it on the dot. What's best for the client at that particular time of their lives and what purpose is it for...etc.

[disneysteve]

I had a client the other day and she is 53 years old. All her kids are grown and she wanted to buy some insurance. After doing an analysis and asking her questions about why she wanted to buy...I suggested a $75,000 Whole Life policy paid in full in 15 years.

Hears why I recommended that. She has no debts and no assets. She specifically asked for enough coverage for her funeral and about $10,000 for each of her kids. Well, it would not be good to give her a Term because of her age. These days, people are living longer and longer and I do not want to gamble and give her a term where she out lives it. If she out lives her term, she would have to buy another policy and it would cost a fortune to attain one at her future age. The whole life policy will guarantee that she will get the benefit. The reason that I suggested the 15 years paid in full because, when someone retires...they don't need to be worried about paying monthly bills. She loved the recommendation and took it with no questions.

Thank you for this example, Wayde. Can we expand on this?

1. What is the premium for the WL policy?
2. What would her premium be for a 20-year or 30-year (if available) level term policy with the same 75K death benefit?
3. When you say she has no assets, what do you mean by that? Does she have any savings? How about retirement accounts like a 401k or Roth IRA? Does she own her home?
4. Am I correct in assuming that "15 years paid in full" means exactly that - that premiums only need to be paid for 15 years and then there are no further costs or charges for the remainder of the person's life and the full death benefit remains in effect?

[dczech09]

Well, I believe you hit it on the dot. What's best for the client at that particular time of their lives and what purpose is it for...etc.

And I understand. But why I failed to see how a whole life policy may benefit more (as I stated earlier) is because you could do pay a much smaller premium with term, invest the difference, and still have a stack of money to live on/pass on.

You're right about the "what if" scenerio if she were to die at 81 and no longer have coverage because the term lapsed. However in 15 to 20 years of investing the difference in premium, that money could have grown to even surpass the whole life benefit. I understand that I have not crystal ball. But neither do you. Neither does she. There is no certainty that term would have been better or worse in that given scenerio.

I agree is that while whole life could make sense and be appropriate for most people, but it is not always the best alternative. I am not against permanent life insurance if it is for a good reason (as I have also said before). In the situation of your client that you brought, it certainly could have been the best alternative. But only the math would tell us what would be best; albeit there are variables left to circumstance.

Where I disagree is this... You stated that at least she will get a benefit when she dies.

I may be reading into this too much. But you're starting to sound like a lot of agents who say "well the problem with term is that you may not get anything back for your money; at least with whole, you will get something back." Thats where I disagree because it totally misrepresents what insurance is for in the first place. Insurance is to cover "maybe,if" situations, not "certainties." Again, I could be wrong with what you were getting at.

And btw no, I do not work in the industry. I used to be a fully licensed advisor but left the industry because the firm I worked for did nothing but push whole life. Kind of put a bad taste in my mouth